Student debt: A solution for SA students

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The challenge of outstanding tertiary fee balances is not unique to South Africa. Across the globe, thousands of students are prevented from graduating or continuing their studies each year because they have institutional debt that they simply cannot settle. Ranging from amounts as low as USD25 (just over R400) in the US all the way through to the local average of R30 000[1], Fundi CMO Mala Suriah argues that the far-reaching costs of the current system are more than just financial. They impact the futures of students and universities alike.

As final year tertiary students across the country sit for their end-of-year exams, the reality facing a significant number of students is that, no matter what their results are, they won’t receive their final marks nor their qualifications. The reason? They cannot settle their outstanding student debt, and also won’t be able to any time in the near future. For some, often the most vulnerable students repeating certain subjects, this makes it potentially easier to simply drop-out before graduation – abandoning both their dreams and the tertiary institutions they were so excited to enrol in when they completed their matric.

“The issue of outstanding balances is a complex one,” notes Suriah. “Given the sheer volume of the debt and its value (currently estimated at around R16.5bn[2]), most tertiary institutions have no other recourse or levers they can use as effectively to motivate students to pay. It’s an untenable solution however, because the vast majority of these students are very simply not in a position to pay: they haven’t chosen not to. As such, we need to come together as a sector to find and finance a solution – not just continue flagging it year after year.”

She adds that the “typical” non-paying student belongs to the “missing middle”: students from low income households who don’t qualify for NSFAS funding. “This is the worst possible outcome for these learners as they are often ‘first-generation’ students: the very first representatives from their families to attend college or university. In addition, many of them have racked up additional debt because they have had to repeat certain subjects or semesters – ballooning their debt further. They will need good entry-level jobs to service the debt; effectively prevented by the fact that they ‘are not qualified’ because they cannot produce proof thereof.”

While corporates like Anglo-American have initiatives and funds to assist in settling this debt, the total amount of CSI funding allocated to the issue across the sector is not enough. “Many students and their parents don’t know that they can take out a loan to service this debt specifically,” Suriah explains. “The benefit here is that the loan can be spread out to accommodate the monthly amount. The outstanding balance can be settled immediately and the student can graduate – leaving with a far more positive prospective outlook in terms of finding a job. This was the intention behind Fundi’s outstanding balance loan solution. It was created as a tool to enable the educational dreams of students.”

Basic consumer financial education should also be offered at tertiary institutions – targeting first year students and first-time loan beneficiaries. Students need to be shown how to budget so that they can live within their means. “Most of us ‘learn’ our financial mindset from our parents or the person who ‘manages’ the money at home. This means that many first-time students often don’t know how to budget – setting themselves up for financial failure.”

With schools closing in the next three weeks – in alignment with tertiary institutions and universities – the question of “now what?” has to be asked and answered. “We have to come up with a solution as a sector to service and solve for this ongoing priority of student debt,” she concludes.